US Stocks Rally for Third Straight Day: Can Tech Earnings Reverse the Market Downtrend? Apple and Tesla Lead the Analysis

Market Sentiment Warms: Technical Signals Behind the Three-Day Rally in US Stocks

Recently, the US stock market has experienced a three-day rally, with the S&P 500 and Nasdaq indices reclaiming key psychological levels after several consecutive days of gains. Some market observers view this move as a sign of technical repair—after a deep pullback, the indices found support in oversold territory, short-term moving averages showed a golden cross, and trading volume expanded alongside the rebound. However, there is disagreement in the market over whether this technical improvement can translate into a trend reversal.

From a technical perspective, after hitting a recent low, the S&P 500's RSI (Relative Strength Index) has recovered from oversold levels below 30 to neutral territory, and the MACD histogram has narrowed, suggesting weakening bearish momentum. The Nasdaq, benefiting from a collective rebound in tech stocks, has reclaimed its 50-day moving average, but the 200-day moving average still poses overhead resistance. This tug-of-war between technicals and fundamentals has left market sentiment in a state of cautious optimism—investors are reluctant to miss the rally but remain wary of unresolved fundamental risks.

Earnings Season Focus: Can Apple and Tesla Act as Market Anchors?

As the new earnings season progresses, the performance of tech heavyweights like Apple (AAPL) and Tesla (TSLA) will be key variables determining market direction. Apple, the largest component of the S&P 500 by market cap, will be closely watched for iPhone sales data, services business growth, and performance in the Chinese market. The market generally expects Apple to benefit from a replacement cycle driven by AI feature upgrades, but weak global consumer electronics demand could weigh on revenue growth. Tesla faces challenges from intensifying competition in the EV market and margin compression; its ability to maintain delivery growth and progress in commercializing FSD (Full Self-Driving) technology will be core focal points in its earnings report.

According to FactSet data, earnings expectations for the tech sector within the S&P 500 have been slightly downgraded over the past month, but overall growth remains positive. If Apple and Tesla's earnings beat market expectations, it could provide a catalyst for tech stocks and the broader index to break higher. Conversely, disappointing results could trigger a new wave of selling, erasing the gains from the three-day rally.

Institutional Fund Flows: Rebalancing Between Defense and Offense

Ahead of earnings season, institutional fund flows show clear divergence. On one hand, hedge funds and mutual funds, after weeks of reducing tech holdings, have recently begun modestly buying back, particularly increasing allocations to AI-related supply chains. According to Goldman Sachs Prime Brokerage data, net buying in the tech sector last week hit a three-month high, with funds primarily flowing into semiconductors and cloud computing. On the other hand, long-term institutions like pension funds and insurance companies maintain a defensive posture, increasing holdings in defensive sectors such as utilities and healthcare while reducing positions in consumer discretionary and financials.

This divergence in fund flows reflects the market's struggle with tech stock valuations and earnings prospects. While the AI theme is still seen as a long-term growth driver, high interest rates and geopolitical risks keep institutions cautious about high-valuation names. If earnings season validates tech earnings resilience, funds may accelerate their shift from defensive sectors back to growth stocks. Conversely, defensive positioning could strengthen further, and market style may pivot toward value and dividends.

Macro Environment: Dual Tests of Rate Expectations and Geopolitical Risks

The sustainability of the three-day US stock rally also depends on the macro environment. The Federal Reserve held rates steady at its latest meeting, but the dot plot still indicates room for rate cuts this year, with market expectations for a September cut rising. According to CME FedWatch data, the market currently prices in about a 60% probability of a 25-basis-point cut in September. However, inflation data remains sticky, with core PCE price index year-over-year growth still above the 2% target, adding uncertainty to the Fed's decision path.

Additionally, geopolitical risks such as tensions in the Middle East and global trade frictions continue to disrupt market sentiment. An escalation of geopolitical events could push up energy prices and risk aversion, thereby capping the rebound in risk assets. Therefore, beyond the short-term catalyst of earnings season, investors still need to monitor the evolution of macro data and policy signals.

Conclusion: Can the Rally Continue? The Key Lies in Earnings Validation

In summary, the three-day US stock rally provides a breathing window for the market, but the technical repair has yet to be confirmed by fundamentals. Earnings reports from heavyweights like Apple and Tesla will serve as litmus tests for market confidence. If earnings season overall is solid and profit growth can absorb current valuations, the indices may break through overhead resistance and start a new uptrend. Conversely, if earnings disappoint, the market could return to a range-bound, bottom-seeking pattern. The divergence in institutional fund flows and macro uncertainty mean investors must remain flexible, balancing optimism with caution.

In the near term, market sentiment leans optimistic, but volatility may increase as earnings are released. Investors should focus on earnings quality and forward guidance rather than just short-term price movements.

Risk Warning

The above content is for reference only and does not constitute investment advice. Markets involve risk; invest with caution. The data and analysis in this article are based on public information and may be subject to lag. Investors should make independent judgments based on their own risk tolerance.